Goldman Settlement Shows Bankers Still Paying to Play
By Michael McDonald - Sep 28, 2012 7:30 AM ET
Neil Morrison brought his experience as a Massachusetts deputy treasurer and a year working on Wall Street to Goldman Sachs Group Inc. (GS) when the firm hired him as a Boston-based public-finance banker in 2008.
While Morrison, now 38, would help the bank pull in $7.5 million in fees for underwriting $9 billion of state bonds before he was fired in 2010, his methods ultimately backfired. Yesterday, Goldman Sachs agreed to pay $14.4 million to settle state and federal charges that Morrison broke rules meant to prevent peddling influence to win government bond business.
“Pay-to-play is an inevitable consequence of bankers seeking lucrative fees controlled by politicians,” said Joseph Franco, a law professor at Suffolk University in Boston and former assistant general counsel at the U.S. Securities and Exchange Commission. “Firms create incentive structures for their bankers that fuel this sort of conduct.”
Congress created the Municipal Securities Rulemaking Board in 1975 to write rules regulating the underwriters of state and local bonds. The MSRB has broadened its pay-to-play rules over the years, limiting how much bankers can contribute to politicians who control state and local bond issues, while the SEC, which enforces the rules, has been increasing its oversight of the $3.7 trillion market.
Improper Contributions
Morrison made improper in-kind campaign contributions to former Treasurer Tim Cahill while seeking bond work from Massachusetts, according to the SEC. While a vice president at the bank, Morrison helped Cahill’s unsuccessful run for governor from November 2008 to October 2010, according to the agency.
“While rules designed to curb conflicts will never eliminate this kind of behavior, strict enforcement of such rules is critical to changing the day-to-day dynamics of politicians, firms and individual bankers,” Franco said.
In an e-mail cited by the SEC, Morrison said, “I am staying in banking and don’t want a story that says that I am helping Cahill, who is giving me banking business. If that came out, I’m sure I wouldn’t get any more business.”
After leaving Goldman Sachs, Morrison worked for a time at Northwind Strategies, a Boston-based political-consulting firm.
The Cahill campaign work by Morrison disqualified Goldman Sachs from underwriting bonds for Massachusetts and its agencies for two years, according to the SEC. Yet the New York-based bank subsequently participated in 30 offerings, improperly receiving more than $7.5 million in fees, according to the agency.
more:
http://www.bloomberg.com/news/2012-09-27/goldman-sachs-agrees-to-pay-12-million-in-sec-pay-to-play-case.html
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